The impact of changing costs on hospitality businesses of all kinds is critical: profit margins can be eroded or disappear very quickly through inattention.
H & C News is therefore very pleased to introduce the first in a quarterly series where we work with Lynx Purchasing and their Purchasing Market Forecast to identify and present for readers a summary of the significant supply and price influences and changes that will affect UK hospitality businesses – your businesses – in the months ahead.
John Pinder, managing director of Lynx Purchasing, says: “At the moment, there seems to be more bad news and dire warnings about global food supplies every day. The impact in terms of price rises will become clear over the coming months. Operators who fail to monitor prices closely will quickly find their margins affected.”
Economic context
The Consumer Prices Index (CPI) annual inflation rate stood at 2.5% in August, with economic commentators predicting the adverse effect of rising oil prices and poor harvests worldwide in the months ahead.
Product inflation rates recorded by the ONS for the year to August are lead by: beef 10.1%; processed fruit 10%; processed fish 6%; soft drinks 4.6%; cereals 4.2%; milk products 3.1%; potato products 2.5
Within the catering sector, ONS figures for the inflation rate for meals served to August are:
- Hotel, restaurant, pub meals 3.2%
- Business, industry, workplace meals 2.2%
- Take away meals 2.8%
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Forecasts by category
“The price of products such as bread and pasta is already rising more quickly as increasing wheat costs from poor harvests in the USA filter through. We are likely to see more of that effect not less in future months.”
Stephen Robertson, British Retail Consortium Director General, September 2012
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Beef and lamb: prices looking stable
Pork: the combination of rising feed and welfare costs, plus reduced production, could see prices rise by more than 10%
Poultry – similarly, rising feed costs could see prices rise between 5% and 10%
Fish: salmon – feed prices and doubts about Chile production could cause price increases; low sea bass stocks will maintain the price; cold water prawns and scampi – prices likely to remain at present levels.
Vegetables: brassicas – heavy rain has reduced availability and prices likely to be at a premium; roots – yields also low, prices buoyant; potatoes – cold, wet conditions will result in significantly reduced crops, also affecting frozen prices in due course.
Fruit: apples and pears – volumes down, prices up; citrus – problems in Spain will be offset by strength of sterling against the Euro.
Milk: pressure to improve prices paid to farmers, plus cost of animal feed, likely to impact prices.
Bread: poor weather in both the UK and America will increase prices.
Oil: reduced supply of soya bean has driven and will maintain price rises.
Gas and Electricity
Historically, increased winter demand results in increased price rises. This is likely to be exacerbated by the cost of introducing Smart Meters (by 2014 for most businesses). 4 of the 6 major energy companies have already announced substantial increases.
Wine, beer and cider
Will all be affected by the impact of adverse weather in mainland Europe on harvests resulting in reduced or more costly production.
Tea and Coffee
Production shortages in Kenya are likely to result in higher tea prices long-term, whilst poor harvests in Colombia and Brazil will have the same effect for coffee.
Office Supplies
European paper prices have increased generally this autumn; rising oil prices will raise packaging costs.
About Lynx Purchasing
Lynx Purchasing was established to provide businesses with a simple and cost-effective way to manage their purchasing requirements. Using experience and expertise acquired over many years, Lynx is able to negotiate the very best prices on a wide range of goods and services on behalf of clients that include hotels, pubs, restaurants and care homes.
Best of all, the service is free to clients: no joining, membership fee or contractual commitment – the suppliers pay a small rebate to Lynx.
To receive your own full copy of the Lynx Purchasing Market Forecast please call Lynx Purchasing on 01937 59108
To find out more about Lynx purchasing click here
Feedback
H & C News and Lynx Purchasing welcome feedback and comment on articles, and suggestions for future articles at any time. Please email rcrowley@einsidetrack.com in the first instance: all emails will be acknowledged.